xxxx I had a watershed moment over a year ago when I read a comment from BP’s CEO John Browne, which said he was very surprised that high crude oil prices hadn’t had a significant impact on the demand for crude oil. Remember, at that time, crude oil had peaked in the upper 70’s in August of 2006 before trending downward into the low 50’s by January of 2007, and then turning upward on a steady march toward the once mythical $100 per barrel that we are all to familiar with today. Crude is now 3.5 times higher than it was just 4 ½ years ago when it was about $30 per barrel.
xxxx That comment was alarming to me because there was the potential for a disconnect from traditional economics such that prices can be pushed ever higher by producers and traders, without a corresponding drop in demand. Market forces react very slowly in the energy industry due to the nature of how long it takes to bring additional capacity on line. In the case of additional crude oil capacity, the cost of exploration is enormously expensive and there are so few places remaining in the world that are conducive to exploring. We are left with arctic climates, very deep sea drilling, or dangerous political environments where private companies can have their assets seized by the state government. Add to this the global economic growth and its demand for oil and the additional capacity needed to keep pace with this growth, as well as the natural decline of existing wells, and we have a problem.
xxxx Compounding my concerns was the fact that the new global economy itself is now much less reliant on the US economy such that a slow down in our economy, doesn’t translate into a global slowdown. We are experiencing a disconnect of the US economy from the rest of the world’s as they gain momentum, and we loose steam. The more the American economy loses steam, the lower the value of the dollar declines. As the value of the dollar declines relative to most other currencies, our cost for a barrel of crude is disproportionately higher than our counterparts in other countries with different currencies.
xxxx Continued borrowing (deficit federal budgets, 9.2 trillion in debt) and lowered interest rates = a weak dollar, and a weak dollar = high inflation, and high inflation = goods from overseas (including OIL) prices escalating for the suppliers to get the same value they had last year = a weak economy, and a weak economy = continued borrowing... see above. This is a vicious cycle and we are caught in a catch 22. For The Federal Reserve to give the economy a boost, it needs to lower rates. For The Federal Reserve to limit inflation, it needs to raise rates. The Federal Reserve can’t fight both battles at the same time.
xxxx We are not in a typical economic slowdown. The United States of America is facing a problem unlike any we have faced in past history. I am not saying this is the worst thing the country has ever faced. What I am saying is that because this is a new dilemma, we must put on our analytical thinking caps and determine a new solution. To do that, we must stop thinking politically and start thinking analytically to understand the problem, and stop throwing out band aides that aren’t going to solve the problem. So let’s look at some of the factors at work here in this economic slowdown.
xx1.Crude demand hasn’t declined proportionately with the increase in
xxxx price. This is due to the fact that our economy is addicted to crude oil, xxxx and in the short term, can’t function without it.
xx2.The value of the dollar is very weak compared to other currencies xxxx
xxxx around the world. All of the goods and services that are shipped into the xxxx US cost us more because foreign countries find the dollar less desirable xxxx to be paid with. Some Asian countries that hold large sums of US xxxx
xxxx treasury notes (trillions of dollars) are having discussions about placing xxxx their investments into other securities or commodities. If this happens, xxxx the value of the dollar will decline even further, which will fuel even xxxx
xxxx higher crude oil prices as well as other goods shipped into the US.
xx 3.The US used to be the largest lender to the world, now we are the xxxx
xxxx largest debtor to the world. We are now almost 9.4 trillion dollars in debt xxxx and the debt is increasing at a rate of 1.7 billion dollars per day. That is xxxx almost $31,000 for every man, woman, and child in the US. My family’s
xxxx share of the US debt is $124,000 and rising. When I first looked at this xxxx some 2 months ago, we were “only” 9.2 trillion dollars in debt.
xxx4.Private oil companies are reinvesting very large percentages of their xxxx profits into share repurchases, instead of additional exploration, even xxxx though crude prices are at all time highs. Are they buying their stocks xxxx because they think they are a good value, i.e., going to go up in price? xxxx A significant drop in crude prices would likely lead to lowered stock xxxx
xxxx prices, so they wouldn’t be buying if they thought crude was going to xxxx drop, would they? Are they not exploring because it is simply too risky, xxxx i.e., poor chances of success in very difficult terrain/environments in xxxx xxxx conjunction with dangerous political events overseas?
xxx5.Sovereign wealth funds (foreign state owned funds composed of xxxx
xxxx financial assets such as stocks, bonds, property, or other financial xxxx
xxxx instruments) are utilizing cash reaped from high oil prices to purchase xxxx US based business interests. We are already deeply in debt to foreign xxxx entities, now they are purchasing US based institutions.
xxx6.Other countries are gaining strength relative to the US due to their xxxx
xxxx natural resources, and are competing with the US for the natural xxxx
xxxx resources necessary to fuel economic growth. The US economy has
xxxx unquestionably become weaker over the past 5 years, while the
xxxx economies of countries such as Russia, China, India, Venezuela, and
xxxx the Middle East region have become stronger over the same time xxxx
xxxx period.
xxx7.The sub-prime housing market was allowed to fuel the economy through xxxx very lenient lending practices. The housing slowdown is somewhat of a
xxxx symptom of the overall bigger picture of America’s lack of a long term
xxxx comprehensive energy model. Rising prices (inflation) due to escalating
xxxx energy prices (oil) was the reason The Federal Reserve began raising
xxxx interest rates about a year ago, which led to ARM’s ratcheting upward,
xxxx which led to higher mortgage payments that consumers couldn’t afford
xxxx along with the already increasing price of everything else due to
xxxx inflation, caused by increasing oil prices. The first problem and the core
xxxx problem were increasing energy prices; the symptoms were mortgage
xxxx defaults and a significant reduction in home sales that lead to an
xxxx economic slowdown.
xxx8.The Federal Reserve is attacking a symptom (the housing slowdown
xxxx and economic downturn) with lower rates because that really is all they
xxxx can do. The root of the problem lies in high energy prices and the
xxxx financial drain that places on the economy. Unfortunately, there is very
xxxx little the Federal Reserve can do about energy prices.
xx 9.The 2007 Energy Bill that includes ethanol mandates is another piece of xxxx the puzzle to rising inflation due to increasing corn prices. Ethanol done
xxxx right can be a very good thing, but done wrong can fuel inflation and
xxxx further weaken the economy. There are other methods available to
xxxx manufacture ethanol, such as switch grass, that is more efficient and
xxxx less disruptive on the nations food supply.

xxxx There is a “crisis” (according to Matthew Simmons, a top oil investment banker, and energy advisor to President Bush and VP Cheney) looming and we must address the root cause if we are to ever find the solution. The CAUSE is the rapidly rising cost of energy over the past 2 years, and our policy maker’s decision to pass a law requiring we make large amounts of ethanol from corn, which has caused the price of virtually everything we touch to go up.  Both of these actions, increasing energy costs and the policy to make ethanol from corn, are a result of our lack of a sound long term energy model for this country.  Milk, bread, eggs, beef, bakery products, etc. are all up “sharply” according to the Labor Departments Wholesale Report that was recently released. 
xxxx What does this mean?  It means people can’t afford to buy food, take their kids to school, and drive to work because prices have escalated so much in the past 2 years that something has to give now that their adjustable rate mortgages have kicked in.  That “give” has been the house payments for people that were already on very tight budgets.  The root cause is the escalating cost of energy and the side effects it has had on virtually everything we touch, including causing Congress to pass an energy bill that pushed corn based ethanol that does very little to solve our energy problems but has been more fuel for the fire of inflationary prices.
xxxx We are entering what will likely turn out to be a prolonged period of stagflation. “But the combination of rising inflation and weaker growth raises the threat of stagflation, the economic malady that plagued the country through the 1970’s, when a series of oil shocks left households battered by the twin problems of stagnant growth and rising inflation.”  From MSNBC, 2-26-08.
xxxx This is precisely what I have been worried about and why I decided to run for Congress. I'm not doing this because I think I will enjoy politics, but I am doing this because I can't shake an internal feeling that I can be, and need to be, a part of determining a long term solution to America's complex energy problems.  Unfortunately, our country is stuck in a ditch and our policy makers have been on the other side of the road slinging mud at each other in the wrong ditch. We must come together and walk across the road to help get this country out of the ditch. I am not saying I can do this alone, because no one gets things accomplished in Washington on their own. It will take a concerted effort by a large group coming together to enact the will of the people and I am willing to try. That is all I am saying, we simply must try. Knowing that I have the technical understanding, the business knowledge, and the personal interaction skills to be successful in being an agent for change, how can I decide not to run?  If this country continues to head in the direction it is heading, and we indeed loose the American Dream one day to the rest of the world, I wouldn’t be able to look my grandchildren in the eye when they ask me what happened.  So I must run for Congress.

xxxxx